Parliament has rejected a proposal by capital market players to extend tax amnesty to all firms listing on the Nairobi bourse as opposed to just those joining through the Growth and Enterprise segment (Gems) category.
The Finance and Planning Committee of the national Assembly rejected the submission by Nairobi Securities Exchange (NSE) and Kenya Association of Stockbrokers and Investment Banks (KASIB), saying it will result into revenue losses for government.
The Treasury in the Finance Bill 2019 offered an amnesty on tax penalties or interest accrued in the two years prior to companies listing on the Gems segment. The move is to encourage more listings on the NSE.
“The committee observed that the proposed exemption in the bill was targeted to micro and medium taxpayers who list on the growth segment. The policy measure was not meant for all taxpayers,” the committee said.
NSE and KASIB had argued that there are many large firms that would be attracted to list on the stock market if the tax waiver is extended to them.
“If these companies list, they will in turn be able to raise capital to enable them expand their businesses and increase their productivity,” the two had argued in their submissions to parliamentary committee.
The Gems segment, launched in July 2013 with relaxed listing rules, has struggled to attract new listings since June 2016.
The main market has also not had any listing by initial Public offer (IPO) since October 2015. Last year, Bank of Kigali listed by introduction.
The NSE is now banking on incubation program, Ibuka, to prepare firms for possible listing on the bourse.
To list on the Gems market, an entity is supposed to have a minimum authorised and fully paid up ordinary share capital of Sh10 million and not less than 100,000 shares in issue.
These are relaxed conditions compared with Sh50 million minimum issued and fully paid up ordinary share capital that is required for firms listing on main investment market segment.